Some Investors Say Sector Has Run Its Course as They Pare Holdings; Others See Some Room to Run

Small-company stocks have produced large returns this year, but some investors say the sector is about to get cut down to size.

In recent weeks, the Russell 2000 index of small-capitalization stocks has hit highs, driven by the outperformance of the U.S. economy relative to many foreign nations. That trend tends to benefit smaller, U.S.-focused companies at the expense of larger, multinational firms.